The patchwork economy

Conditions to remain uneven

The strength of the overall economy masks some significant divergences between industries and regions, with some sections of the Australian community not experiencing the immediate benefits of Mining Boom Mark II.

Conditions in certain industries are expected to remain challenging.

The high exchange rate is weighing on activity in some industries — particularly exporters in the tourism, education and manufacturing industries.

For many businesses, these challenges are compounded by legacies of the GFC, including a more cautious consumer and tight credit conditions for some borrowers.

Labour market to tighten further

Labour market constraints are likely to increase as the mining boom ramps up, with businesses not linked to the boom likely to find it relatively more difficult to attract and retain workers.

Price and wage pressures are also likely to emerge in some sectors as the labour market tightens.

Government is taking action

The Budget continues to make the investments we need to position Australia to take full advantage of the mining boom.

Australia's high terms of trade, strong growth outlook and tightened macroeconomic policy settings have seen the Australian dollar appreciate to post‑float highs. In the current macroeconomic context, the high exchange rate and withdrawal of fiscal and

monetary policy stimulus are helping to moderate inflationary pressures as the economy returns to full employment.

The Government is dealing with the short‑term costs of natural disasters, while making room for strengthening private sector activity — particularly for the resources boom that is gathering pace.

The medium‑term challenges require important investments in our workforce, boosting skills and participation, while ensuring other important challenges are not ignored.

The Government is making further investments in areas such as mental health and broader health reforms, as well as supporting new priorities in education, and making sure our regions benefit from the mining boom.